This time last year there was nothing happening at all, according Roger Haworth of M3. The good news is that “things have started to move on now and hopefully will continue to throughout 2010.”
There was a sudden influx of big logistics lettings in Yorkshire a few years ago, causing a flurry of excitement in the industrial market. MFI, Ikea, Next and Asda all took substantial properties in the region, which spurred developers on and encouraged a huge amount of speculative development in the area.
“There was a spec boom two to four years ago which saw all funds being ploughed into Yorkshire, particularly in South Yorkshire,” says Haworth. “But then the market dropped severely leaving a lot of empty buildings, so landlords are now pretty keen to get rid of them.”
Nick Baker of BNP Paribas Real Estate reckons there are at least 13 new, vacant warehouses over 100,000 sq ft in the region, with a total floor space of 3.66 million sq ft.
As such, incentives have improved dramatically from an occupier’s perspective. Landlords are now considering things they wouldn’t have dreamed of a few years ago as they’ve recognised that it’s better to have someone in over the short-term rather than holding out for a better deal as the demand just isn’t there.
“In extreme cases,” says Baker, “six month rent-free periods are being offered on leases as short as three years.”
Typically, however, Haworth reckons landlords are offering two years rent-free on a ten-year lease for a decent covenant and three years on a 15-year lease.
But these deals aren’t going to be around forever. “Rather than hold off because of the economic climate, now is the time to look,” he advises, “because there is only so much supply. If you’re ever going to get a good deal now is the time you’re going to get it.
“No developments are being built at the moment so there won’t be any more supply when these buildings are gone and occupiers certainly won’t be able to get such amazing deals.”
Mike Baugh of DTZ agrees: “As supply gets mopped up the deals will start to harden and will swing back in favour of landlords. Prime locations in Yorkshire will see steady take up, but although deals might be flexible at the moment, the opportunity for cracking deals will diminish over the next 12 months.”
According to Haworth, some of the more savvy occupiers started to realise this towards the end of last year, and as such from September 2009 there was a clear improvement in the industrial market in Yorkshire, particularly in West Yorkshire.
Vasanta snapped up 250,000 sq ft at Wakefield Europort off ProLogis, after previous occupier Awson went into administration.
While, records management company Sala International signed a 15-year lease for a 92,000 sq ft warehouse at Evander Properties and Angelsea Capital’s Sherburn Distribution Park development in North Yorkshire. CB Richard Ellis, M3 and DTZ were joint letting agents and Knight Frank represented Sala International.
Rob Oliver of GVA Grimley points to a number of other deals done towards the end of 2009. AF Blakemore, which supplies Spar stores, took 80,000 sq ft site at Premier Park, Leeds; bed specialist Dreams took 63,000 sq ft from PPG at Link 62; VOW took a 250,000 sq ft site at ProLogis’ Wakefield Europort and WH2L took 60,000 sq ft at Wakefield from Royal London.
But “it’s a tale of two markets,” says Oliver, because while West Yorkshire has seen some improvement, South Yorkshire is still struggling to shift empty properties.
According to Oliver, Scotts Miracle-Gro has shortlisted three properties in the region and is likely to press the button on one soon. The only take up in South Yorkshire recently has been car supermarket chain The Car Shop though, which bought a second-hand 142,000 sq ft unit at Trax Park in Doncaster in the autumn.
Haworth reckons there are currently a few good enquiries though. “At present in the Yorkshire region there is probably one million square foot of strong, genuine interest in the market, which is likely to come to fruition in the next three months.
“Quite a few occupiers are looking for 100,000 – 200,000 sq ft at present, and there are also a couple of really big enquiries over 500,000 sq ft in the region.”
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